Ethical Decision

In the realm of Business Studies, the concept of an ethical decision continues to be integral. Managers and executives often grapple with various facets of ethical decision making, influencing business conduct and outcomes. This article will demystify this nuanced process, starting with understanding what an ethical decision entails, through to examples of ethical decisions in a business context. Learn about the principles that underpin such decisions, explore the process in-depth, and discover actionable recommendations for practising ethical decision making in everyday management. Whether you're a seasoned manager or new to the role, this comprehensive guide provides much-needed clarity on ethical decision making and its pivotal role in Business Studies.

Get started Sign up for free
Ethical Decision Ethical Decision

Create learning materials about Ethical Decision with our free learning app!

  • Instand access to millions of learning materials
  • Flashcards, notes, mock-exams and more
  • Everything you need to ace your exams
Create a free account

Millions of flashcards designed to help you ace your studies

Sign up for free

Convert documents into flashcards for free with AI!

Table of contents

    Understanding Ethical Decision in Business Studies

    In the context of Business studies, 'Ethical Decision' is a term that you may often come across. It fundamentally revolves around choices that respect ethical principles and are in line with the universal morals concerning what is right and wrong. More formally, it involves a process where decisions are made based on ethical rules and standards.

    Ethical decision: A choice made that respects ethical norms and values, usually referring to the ones which revolve around honesty, fairness, rights, etc.

    Ethical Decision Definition: Basics for New Managers

    For new managers, understanding the concept of ethical decision-making is crucial. It not only helps maintain a professional environment but also fosters corporate responsibility and trust. Such decisions often involve considering various factors such as societal norms, organizational culture, and business ethics codes. The steps typically involved in ethical decision making are as follows:
    • Identify the ethical issue or problem.
    • Evaluate the alternative actions considering various perspectives.
    • Make a decision and test it for fairness.
    • Implement the decision.
    • Reflect on the decision and its outcomes.
    The ethics adherence in business decisions can be illustrated through the ethical decision-making model:
    Identify issues Generate options Evaluate options Take action Reflection
    Recognizing an ethical issue Generating a set of feasible ethical actions Applying ethical judgment to choose the best course of action Implementing the ethical action Reflecting on the decision made

    Studies show that managers who follow ethical decision making are not only respected among their peers but also have higher team motivation and productivity. It contributes to building a stronger brand reputation and gaining customer loyalty.

    Assumptions and Implications in Ethical Decision Making

    Making ethical decisions is not strictly about the individual's character or moral compass. Notably, assumptions play a significant role in the process. Here are some common assumptions involved:
    • The decision-maker is aware of the ethical problem.
    • The decision-maker is willing to make an ethical choice, even if it is a difficult one.
    • The decision-maker believes that the chosen ethical conduct will have a preferred outcome.

    For instance, a manager might have to make a decision between firing an underperforming employee or providing them with additional training. While the assumption might be that firing the employee could lead to short-term gains, an ethical decision would consider the implications over the longer term, including the emotional cost to the employee and the reputation of the company.

    Ethical decisions might start with assumptions, but they undeniably lead to implications, both, for individuals and the organization. Within an organizational context, the implications often revolve around team morale, business reputation, legal issues, and overall business performance. Therefore, understanding the reality of these implications and managing them effectively is key for success in a managerial role.

    Principles of Ethical Decision Making

    As you delve deeper into the world of business, you'll find that the principles of ethical decision making have significant weight. Essentially, these principles guide managers and employees alike in navigating the potentially turbulent waters of ethical dilemmas in the business setting. By adhering to these principles, business decisions reflect not just fiscal or strategic interests, but more importantly, the ethical values of the organisation.

    Essential Principles in Ethical Decision for Managers

    Managers play a pivotal role in shaping and influencing the ethical culture of an organisation through the decisions they make. Consequently, they must be guided by a set of ethical principles that act as a compass during decision-making processes. Here, you will explore some of these key principles in great detail:
    • Responsibility: Managers have the duty to accept the consequences of their decisions. This requires acknowledging and correcting mistakes when they occur.
    • Accountability: This principle emphasizes that managers are answerable for their actions and decisions.
    • Respect: This principle promotes dignity and equality, warranting that all individuals in the organisation are treated with respect, regardless of their position or background.
    • Transparency: A cornerstone of trust cultivation, this principle enshrines that actions and decisions should be open and clear, reducing potential for suspicion or misunderstandings.
    • Integrity: Managers are encouraged to uphold utmost honesty, refraining from deceptive practices, ensuring their actions align with the company's ethical standards.
    Let's consider a scenario for the company XYZ Corporation. Let's say the firm is facing accusations of environmental harm due to waste disposal practices. The principles mentioned above can guide a manager's decision-making process in the following way:
    Responsibility The manager acknowledges the environmental harm caused and commits to rectify it.
    Accountability The manager holds the firm accountable and communicates the same to stakeholders.
    Respect The employee’s concerns about the harm are validated and respected.
    Transparency The manager openly communicates the company's plan of action to stakeholders.
    Integrity The manager ensures that the company stays truthful about the actions and their impact.

    Cultivating Principles of Ethical Decision Making in Daily Management

    Embedding these principles into daily management operations can have profound effects on the ethical fabric of a company. The starting point is advocating for a culture of ethics where these principles are integrated into the organisation’s vision and mission. This can, in turn, lead to the development of an ethics code, which outlines expected behaviours and provides a reference point for decision making.

    An ethics code: A set of principles designed to guide employees in making decisions that conform with the ethical values of the organisation.

    Training and communication serve as powerful tools in embedding these principles. Managers should receive regular training on ethical decision-making. This can take the form of workshops or seminars on ethical behaviour, where practical examples and best practices are discussed. Effective communication of the expected ethical standards and principles is key to their successful assimilation in the organisation. Clear and consistent communication, especially from top management, can reinforce the importance of these principles in shaping the company's ethical climate. Lastly, recognition and rewards for ethical behaviour can greatly encourage the application of these principles in daily management tasks. By rewarding ethical behaviour, the organisation conveys the message that ethics is a core value and is appreciated.

    For instance, a manager who communicates openly about a dilemma and how it was resolved in line with the ethics code could be praised openly during a team conference. This not only reinforces the importance of ethical behaviour but also sets an example for other employees.

    Over time, you will find that these principles of ethical decision-making form the pillars of not just an ethically conscious organisation, but one that is more successful, loved, and respected by its employees and stakeholders alike.

    Process of Ethical Decision Making: A Deep Dive

    In the academic field of Business Studies, making progress in your understanding of ethical decision-making is paramount. This involves unraveling the layers of complexities that contribute to it and understanding the multiple approaches in its implementation. Let's take a deep dive into this captivating process.

    Six Steps to Ethical Decision Making in Business Studies

    The highly regarded six-step approach to ethical decision making offers valuable guidance in resolving ethical dilemmas in business. It provides a structured process that supports thoughtful and principled decision making. Each step plays an essential role, and when performed in sequence, the outcome is an ethical decision that aligns with moral values and professional responsibilities. The six steps are:
    • Problem Identification: Recognising that an ethical problem exists is the first step. This involves a careful assessment of the situation, facts and the parties involved.
    • Collecting Information: This involves complete understanding of the problem by gathering all relevant information, thereby making an informed decision.
    • Identifying Options: Here, all possible solutions to the ethical issue at hand are identified and explored. This process requires creativity and open thinking, and may even involve seeking advice.
    • Evaluating Options: Each identified option should be evaluated against ethical principles. Pros and cons should be weighed, outcomes anticipated, and the impact considered on affected stakeholders.
    • Making a Decision: After careful evaluation, an ethical decision is made. This decision is expected to meet the highest standards of ethical behaviour.
    • Implementing the Decision: The last step involves acting on the decision and evaluating its impacts. Any consequences that result from the decision should be managed.
    Bringing these steps to life, consider a hypothetical scenario in which an HR manager has stumbled upon some confidential information that could negatively impact a few employees. The ethical dilemma is whether or not to share this information.
    Problem Identification The HR manager recognises the ethical dilemma
    Collecting Information The HR manager reviews the confidentiality policy and employee rights.
    Identifying Options The HR manager identifies options such as keeping the information confidential, divulging it to the affected employees, or seeking upper management's advice.
    Evaluating Options The HR manager weighs the pros and cons of each solution from an ethical viewpoint, considering potential effects on the employees and the organisation.
    Making a Decision The HR manager, after careful evaluation, decides to respect the confidentiality policy and not share the information but discusses the issue with upper management, expecting them to act in the employees' best interest.
    Implementing the Decision The HR manager executes the decision by discussing the issue with the management and keeps monitoring the situation.

    Ethical Decision Making Process: Models and Theories

    Given the universal significance of ethical decisions, many ethical decision-making models and theories have emerged over time. A few commendable ones are: 1. Ferrell and Gresham's Contingency Framework: It highlights the role of individual and situational factors, and opportunity in shaping ethical decisions. 2. Trevino's Person-Situation Interactionist Model: This model positions ethical decision-making as a product of both individual and situational characteristics. 3. Rest's Model of Ethical Action: Based on the psychological view, Rest's model describes four components - moral sensitivity, judgement, motivation, and character - that drive ethical action. 4. Kohlberg's Cognitive Moral Development Theory: Kohlberg identified six stages of moral development, arguing that ethical understanding progresses from a basic level of avoiding punishment to an advanced level of making decisions based on universal principles of justice and rights. The Ferrell and Gresham's Contingency Framework, for example, could be represented by the function: \[ \text{Ethical Decision} = f(\text{Individual Factors}, \text{Situational Factors}, \text{Opportunity}) \] In this function, ethical decisions are a result of individual factors (like knowledge and values), situational factors (like professional norms and culture), and opportunity (like organisational and legal constraints). A decision is deemed ethical if it enhances social welfare while abiding by the individual's and society's moral standards. An understanding of these models and theories can lend a more nuanced perspective to ethical decision-making and help to recognize the varying influences that can shape ethical decisions in a business context. Armed with this knowledge, you stand prepared to navigate the course of ethical decision-making with greater consciousness and dexterity.

    Practical Ethical Decision Making: Step-by-step Guide for Managers

    Managers are often faced with situations where they must make decisions that have ethical implications. These scenarios are loaded with a special set of challenges and require an approach that ensures the utmost respect for ethical norms and principles. This can be a daunting task but arming oneself with a robust, step-by-step guide can help navigate this complex terrain. The remainder of this section will delve into the practical aspects of ethical decision making specifically for managers.

    Ethical Decision Making Models: A Comparative Analysis

    To better understand how to systematically approach ethical decision-making for managers, it's crucial to examine the different models that offer varied perspectives. These models serve as roadmaps, guiding individuals through the complexities of ethical dilemmas.
    • Utilitarian Approach: This model centres on outcomes and consequences. The most ethical course of action is one that results in the greatest good for the greatest number of people.
    • Rights-based Approach: Based on the philosophy of Immanuel Kant, this approach prioritises respect for human dignity and rights. It holds that all decisions should uphold the rights and dignity of individuals, regardless of the consequences.
    • Justice-based Approach: This model posits that ethical decisions should be founded on fairness, which can encompass distributive justice (fair distribution of benefits), retributive justice (fair punishment) or compensatory justice (fair compensation for harm or injury).
    • Virtue Ethics Approach: This perspective focuses on the moral character of the individual making the decision. Decisions should reflect virtues like honesty, courage, compassion, and other essential moral traits.
    To offer a comparative analysis, assume there's a hypothetical scenario where an organisation must decide to lay off a percentage of its workforce due to financial constraints.
    Approach Application on Layoff Scenario
    Utilitarian The layoffs are implemented if the overall wellbeing of the remaining workforce and company's survival are ensured, despite the negative impact on those laid off.
    Rights-based Staff layoffs might be viewed as unacceptable as it infringes on the employee's right to job security. Other solutions would be explored.
    Justice-based The layoffs might be deemed as fair if they are carried out impartially, with the necessary measures for fair severance packages and support for those affected.
    Virtue Ethics A virtuous manager may choose layoffs only as a last resort and would handle the process with compassion, empathy, and transparency.
    It's clear that each model provides a distinct lens to view ethical dilemmas and shapes different outcomes.

    Application of Ethical Decision Making Steps in Real Business Settings

    The theoretical constructs of models and steps offer a solid foundation. However, truly mastering ethical decision-making necessitates its application in real-world settings. Consider the case of a manufacturing company facing an ethical dilemma - whether to spend substantial sums on installing advanced emission control systems which will significantly reduce the environmental impact, but comes with steep costs. In this scenario, practical steps using a combined model approach could be applied as follows: Step 1 - Identification: Recognising that continuing with existing emission levels is an ethical issue is crucial. This represents a conflict between serving environmental responsibilities and maintaining financial stability. Step 2 - Gathering Information: Obtain detailed cost estimates, potential environmental benefits and impacts, and legality of current emission levels. Step 3 - Generating Choices: Some possible options include a) Implementation of the full system immediately, b) Gradual implementation over time, c) Adoption of an alternative, less expensive system. Step 4 - Evaluation: Here, the models could be applied. A utilitarian approach would favour the option optimising the environmental benefit and financial outlay. The rights-based model would weigh in on the rights of future generations to a clean environment. The justice-based model would seek fairness in sharing the environmental impact among stakeholders. The virtue ethics model would look at the moral integrity of the decision-makers. Step 5 - Decision: After thorough evaluation, the decision might lean towards a balanced solution such as gradual implementation. Step 6 - Implementation: Relay the decision transparently to all stakeholders, install the system over time and evaluate the impact. This example provides a glimpse into how the integration of ethical models can provide a more holistic way to resolve ethical dilemmas in business.

    Exploring Ethical Decision Examples in Business Studies

    Business Studies, as a discipline, delves into the diverse aspects of running a business – from finance and marketing, to management and ethics. One intriguing and complex area within Business Studies involves Ethical Decision Making. By studying examples from real-life businesses, it's possible to better understand the role of ethical decision making in shaping a business's actions, image, and growth.

    Case Studies of Ethical Decision Making in Management

    Two compelling case studies that demonstrate the complexities of ethical decision making, and the outcomes of such decisions, involve the companies Patagonia and Uber. Known for their diametrically opposed approaches to ethical decisions, these companies offer enriching insights for anyone interested in Business Studies.

    Patagonia is an outdoor clothing and gear brand well-known for its unyielding commitment to environmental preservation and corporate ethics. One such ethical commitment involves the company donating 1% of its total sales or 10% of its profit, whichever is more, to environmental groups since 1985 under its "1% for the Planet" programme. While, economically, this decision could be seen as impacting profits negatively, Patagonia chose to prioritise its ethical responsibility towards the environment over higher profit margins. Moreover, such ethical decisions have, in fact, boosted the brand's image, culminating in increased customer loyalty and long-term growth.

    Contrastingly, Uber faced numerous controversies due to a series of unethical management decisions. Amongst these was the misuse of private user data, which resulted in violating user privacy – showing blatant disregard for ethical principles related to privacy and security. The consequences of this unethical decision were dire, resulting in substantial damage to Uber's reputation and losing customers' trust. Clearly, these two examples demonstrate that ethical decision-making in business is not sacrosanct but rather dependent on the values held by the organisation's leadership.

    Lessons from Ethical Decision Examples: Success Stories and Failures

    The lessons that Business Studies students can glean from these real-life examples are multifaceted.

    From Patagonia's example, it becomes clear that ethical decisions, even when they seem to negatively impact short-term profits, can yield positive outcomes in the long run. These decisions have solidified Patagonia's reputation as a truly eco-friendly brand and have garnered a dedicated customer base that aligns with its environmental values. Thus, Patagonia stands as a compelling testament to the value of aligning business operations with ethical commitments.

    However, it's equally crucial to reflect upon the failures. Uber represents the flip side of the coin. In Uber's case, ethical decisions were trumped by business objectives leading to a series of missteps. The ensuing fallout serves as a stark reminder that unethical decision-making not only tarnishes a company's public image but also erodes trust among its customers, resulting in long-term business damage. Delving deeper into these examples, it's clear that ethical decision-making involves a complex interplay of varied factors - moral, legal, financial, and reputational. Making ethical decisions shouldn't be solely about weighing in a cost-benefit analysis within a traditional business mindset. It requires an understanding and respect for the intrinsic value of ethical standards themselves. Successful businesses are those that understand that ethical decision-making is an essential, indivisible component of their overall business strategy. Failures often indicate a myopic approach to ethics, where ethical norms are seen as obstacles to profitability rather than being integral to a sustainable, long-term, business model. These real-life case studies provide invaluable, tangible context to the theoretical aspects of ethical decision-making in Business Studies, enriching the learning process and bridging theory with practical application.

    Ethical Decision - Key takeaways

    • Ethical Decision definition: It recognises key principles like Responsibility, Accountability, Respect, Transparency, and Integrity used by managers to achieve structured and morally sound outcomes.
    • Principles of Ethical Decision Making: These principles - Responsibility, Accountability, Respect, Transparency, Integrity - guide managerial decisions, ensuring actions align with the company’s ethical standards.
    • Ethical Decision Making Process: This involves the six-step approach of Problem Identification, Collecting Information, Identifying Options, Evaluating Options, Making a Decision, and Implementing the Decision to provide structured and thoughtful solutions to ethical dilemmas.
    • Ethical Decision Making Models: Several models exist within this realm, including Ferrell and Gresham's Contingency Framework, Trevino's Person-Situation Interactionist Model, Rest's Model of Ethical Action, and Kohlberg's Cognitive Moral Development Theory, which provide varied approaches and insights into ethical decision-making.
    • Ethical Decision examples: Real-world examples of ethical decision making can range from managing environmental impacts in a manufacturing company, to addressing matters of confidentiality within human resource management, each requiring careful assessment and responsible actions.
    Ethical Decision Ethical Decision
    Learn with 15 Ethical Decision flashcards in the free StudySmarter app

    We have 14,000 flashcards about Dynamic Landscapes.

    Sign up with Email

    Already have an account? Log in

    Frequently Asked Questions about Ethical Decision
    What are ethical decisions?
    Ethical decisions are choices that individuals or organisations make based on their beliefs about right or wrong. They involve the consideration and evaluation of principles such as honesty, fairness, and respect whilst making decisions that could have significant implications.
    What is an example of an ethical decision?
    An example of an ethical decision in business could be a company choosing to invest in renewable resources despite being more costly, based on the belief of preserving the environment over maximizing their profits.
    Why are ethical decisions important?
    Ethical decisions are significant as they foster trust and transparent relationships among businesses, customers, and stakeholders. They support business integrity and contribute to a positive reputation. Moreover, ethical decision making helps avoid legal problems, fuelling the long-term survival and success of the business.
    How are ethical decisions made in an organisation?
    Ethical decisions in an organisation are made based on the company's established code of ethics. They involve analysing and evaluating a situation, identifying possible actions, and choosing the most ethical option. The chosen decision should align with the organisation's values, mission, and legal requirements.
    What are the three types of ethics in decision-making?
    The three types of ethics in decision-making include consequential ethics (judging decisions based on their outcomes or consequences), deontological ethics (focusing on duty or rules), and virtue ethics (basing decisions on individual character and virtues).

    Test your knowledge with multiple choice flashcards

    What factors are involved in Ferrell and Gresham's Contingency Framework for ethical decision making?

    How can companies cultivate principles of ethical decision making in daily management?

    What example of ethical decision making can be seen in the company Patagonia?


    Discover learning materials with the free StudySmarter app

    Sign up for free
    About StudySmarter

    StudySmarter is a globally recognized educational technology company, offering a holistic learning platform designed for students of all ages and educational levels. Our platform provides learning support for a wide range of subjects, including STEM, Social Sciences, and Languages and also helps students to successfully master various tests and exams worldwide, such as GCSE, A Level, SAT, ACT, Abitur, and more. We offer an extensive library of learning materials, including interactive flashcards, comprehensive textbook solutions, and detailed explanations. The cutting-edge technology and tools we provide help students create their own learning materials. StudySmarter’s content is not only expert-verified but also regularly updated to ensure accuracy and relevance.

    Learn more
    StudySmarter Editorial Team

    Team Business Studies Teachers

    • 19 minutes reading time
    • Checked by StudySmarter Editorial Team
    Save Explanation Save Explanation

    Study anywhere. Anytime.Across all devices.

    Sign-up for free

    Sign up to highlight and take notes. It’s 100% free.

    Join over 22 million students in learning with our StudySmarter App

    The first learning app that truly has everything you need to ace your exams in one place

    • Flashcards & Quizzes
    • AI Study Assistant
    • Study Planner
    • Mock-Exams
    • Smart Note-Taking
    Join over 22 million students in learning with our StudySmarter App
    Sign up with Email

    Get unlimited access with a free StudySmarter account.

    • Instant access to millions of learning materials.
    • Flashcards, notes, mock-exams, AI tools and more.
    • Everything you need to ace your exams.
    Second Popup Banner